Weekly Update from Baker and Lindsey, Inc. | Niceville Office

Happy Independence Day!  As we look over the first half of 2009 it’s easy to focus on the volatility that grabbed the headlines week after week.  But this weekend is a powerful reminder that America has survived and, in fact, thrived through adversity for more than 230 years. Thanks to the diligence, wisdom and perseverance of the American people, we will navigate today’s challenges to reemerge stronger in the years to come.

We couldn’t be more proud of our support of the American dream.  Many people have inquired with us recently about purchasing their first home.  This has been made possible through housing that is more affordable now than at least since 1971 when the National Association of Realtors began calculations using their Housing Affordability Index.  I have been over this index many times in past newsletters.  Recent local numbers are posted at our website, available by clicking here.

We were able to help Ashley Davis accomplish the American dream with the purchase of her first home.  Her story was told on the front page of the Northwest Florida Daily News, and you can view the article by clicking here.

We are deeply grateful for our ability to help Veterans purchase homes.  Over 50% of our closings over the last 2 months have been for active, retired, and disabled Veterans using a V.A. loan.  I have a deep respect for Americans that have volunteered to serve our country in this way, and as such always work extra hard for these selfless individuals.  We’ve recently helped several individuals who are coming to the area to support the mission of the Joint Strike Fighter, and we are looking forward to the working with individuals with the Army 7^th Special Forces Group that is coming from Fort Bragg.  If you or someone you know is looking for a V.A. loan please direct them to our coupon located at LocalAdLink by clicking here.

Please enjoy this Independence Day, remembering the hard fought battles that allow for our continued freedoms.  These include military battles, political battles, and finally (and most importantly to me) battles for our families – raising a generation of service to others and country above self.

We’re providing a professional approach to mortgage finance!  How can we help you?

Weekly Update from Baker and Lindsey, Inc. | Niceville Office

Facing the Giants.  That’s one of my constant challenges.  In my world, one of the giants is the biggest bank of America, and in the other case it’s a company that well… could be based in Fargo.  These two companies are my nemeses.  Not because they can compete with me on service; in fact it’s quite the opposite as I’ll detail below.  They are my nemeses because they have brand recognition.  They have the pocket depth to out advertise me.  Indeed America has given both of them bailout funds as they were reeling from the effects of questionable (demonstrated bad) business practices.  And even now, I see commercials with happy people presumably smiling because they had a great experience with one of the Giants.  Guess what?  You can tell an actor to smile and they’ll do it!!

So how do you beat a Giant?  Just like you eat an elephant I suppose – one chunk at a time.  Since May 16^th we’ve taken 5 big chunks out of the Giants by closing 5 loans that the Giants either denied or couldn’t get done in time to comply with contracts.  In all cases the customer decided originally to do business with the Giant because they thought “it’s a big company, it will be fine”.  Guess what, big isn’t better in this case!  In fact, big is bad.

I’m guessing that these companies are having such trouble because they’re so busy with refinancing that they don’t have the manpower to provide a respectable level of service to their clients.  Refinances take a long time, and people that are contractually obligated to close on a purchase loan are told “we can’t close a loan within 30 days”.  Ha!  We’ve closed them in 4 hours lately!  You can read about that on my blog by clicking the link on the upper left of this newsletter.  And to make matter worse for the Giants, I see an article today on CNN that says much of the top talent at these organizations is leaving because of the government control.  Makes you wonder what’s to come huh?

If you’ve read my newsletter for long you’ve heard about our “professional approach to mortgage finance”.  Perhaps I’ll take a moment to explain what I mean by using examples of loans we’ve closed since May 16 and contrasting what isn’t a professional approach with what is!  In more than 1 case the Giants had people waiting at a title company literally all day believing they could close “in just 15 minutes” when ultimately it never happened,  that’s not a professional approach.  In 2 cases loans had been denied because the Giant underwriter didn’t like the appraisal or the borrower’s income situation after initially saying it would be fine, that’s not a professional approach.  In 1 other case, the Giant told the buyer they couldn’t close a government loan within 30 days, that’s not a professional approach.  In still another case the Giant sent the widowed borrower a 4 page list of items needed for her loan (written with language only someone in the industry would understand) and told her to contact the VA and get her eligibility straightened out. That’s not a professional approach!  In all of these cases we were able to close the transaction and quite literally save the day.  I encourage you to come by our office and read some of our testimonials, or visit the website and read them there.

Today a buyer told me that he appreciated that I was “more personable” than the Giant and that I was “better able to explain the ins/outs of the different financing options to a new homebuyer like (himself)”.  However, he talked to the Giant first, so to “minimize the paperwork” he decided to stay with the Giant.  That’s what deep pockets will buy I guess.  The advertising to get the first call, but ultimately it doesn’t buy the competent people needed for ensure customers experience a professional approach to mortgage finance.

We’re providing a professional approach to mortgage finance!  How can we help you?

Weekly Update from Baker and Lindsey, Inc. | Niceville Office

Have you ever been unicorn hunting?  If so, you came back empty handed didn’t you?  Many people we have talked to over the last couple of months may as well be full time unicorn hunters!  The unicorn, in this case, is the elusive 4.5% interest rate without points.  We had several people that had a 4.75% offer in hand, but opted to wait until rates got lower.  That proved to be like hunting for a unicorn; and now those people would gladly take a 5.0% rate!!

The Federal Reserve has spent over $550 Billion dollars year to date in an effort to drive down mortgage interest rates.  For the most part, the plan worked.  However, their plan could only do so much and it wasn’t a permanent buy down.   According to Freddie Mac the average interest rate for the week of May 21 was 4.82%.  In the following 3 weeks interest rates have risen to 5.59% for the week of June 11.

Fortunately, since that time interest rates have begun to improve.  So why the spike and will we ever see rates below 5.00% again? 

First of all, let me start with a disclaimer.  We have been in a period of several months where the financial markets are not taking their cues from economic indicators any longer.  The market is being driven wildly by fear.  I remember when Saddam Hussein was found in that hole and the stock market shot higher in belief that the war was a thing of the past.  That day I think interest rates worsened by .25%; and that day hung in my brain as a HUGE day in the market.  Flash forward to today and we have interest rate swings of at least .25% almost regularly.  Is there logic for it?  No.  Investors want to be at the forefront with buyers and sellers, (whatever the flavor of the hour) and they seem to have a stomach for buying or selling a lot!  So because fear is unpredictable you must allow me the caveat to be wrong.

Have you ever tried to mop up a flood with a sponge?  You’d better have a big sponge, or a small flood!  With all the mortgages being refinanced currently, all of those mortgage backed securities are no longer securitized by a mortgage.  They’re being sold again on the market. There is a huge supply of securities right now (the flood) and few buyers (sponges).  The Fed can buy them, but only so much at a time.  With increased supply comes lower price.  With lower price comes less money to lend and thus higher interest rates. 

Additionally, the Fed’s efforts are very inflationary.  They are buying debt like crazy.  This has got to cause inflation (eventually) and the fear of inflation is terrible for long term securities like long term mortgage rates.  Investors are planning for this inflation by selling long term securities and buying stocks.  In the last couple of days we’re seeing a reversal of this, but long term I believe interest rates are going to continue their trend upward with little dips along the way.

The good news is that the economy is showing glimmers of life, housing seems to be really be taking off, both nationally and locally, and people can still get a mortgage in the mid 5% range.  Historically how often does that happen?? 

Dempsey Hammond, Jr. a friend of mine and President of “Asset Protection Strategies, Inc” has this to say about interest rates:  “Under President Obama’s Budget Plan, the Federal Debt has exploded. Unfortunately, it is rising much faster than our Gross Domestic Product (GDP). The Congressional Budget Office projects that the Federal Debt is on-track to hit 100% of GDP in just another 5 years. This Debt burden is clearly incompatible with our current Triple A rating. The time to “lock-in” rates is now before the potential downgrade is realized, and subsequent rates increase.”

I believe Dempsey is correct.  Are you hunting unicorns, or are you going to finally take advantage of our (still) low interest rates to purchase or refinance a home?

We’re providing a professional approach to mortgage finance!  How can we help you?